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The deterioration of the environment has now become a significant global and national problem. In the past, people were never concerned about how they exploited the existing resources and they have just come to realize that with the current rate of resources usage, in a few decades to come there will be nothing to exploit.
The problem of overexploitation of resources has been aggravated by the increasing population. As the population increase, the basic needs for human beings also increase and as a result, it is natural for human beings to meet their basic needs.
It all started with the agrarian revolution after this the revolution which brought much of these problems has been the industrial revolution.
With the man needs becoming insatiable due to the increasing population and the existing scarce resources, man has sought all the available alternatives to satisfy his needs and this has resulted in exploiting of resources in a selfish manner leading over exploitation and a threat in that if the current rate of resources continues, future generation might be left with nothing.
There is a need for man to allocate the resources available in a sustainable manner if the future generations are to enjoy the same products we are. Allocation of minerals in a sustainable manner means that at minimum, future generations should not be left worse off than the current generation.
However, it is important to note that this sustainability criterion does not usually indicate that exploiting of more resources at the present is dangerous or selfish as long as the future generations remain at least well off as the current generation.
Unless human activities on our environment are reduced and we start relying on renewable resources rather that the overreliance we have shown on the non renewable resources then the problem is bound to continue.
The problem of over exploitation has been investigated, tackled and analyzed by different experts in different fields including sociology, engineering and the economic aspect.
In this essay, we shall tackle the problem of over exploitation through the economic aspects which are related or are known to be the main causes of over exploitation in our planet.
Economic experts have investigated the problem of over exploitation of natural resources for quite a period now and they have described some of the aspects which lead to over exploitation of natural resources to include improperly design property rights, presence of public goods, imperfect market structures and the divergence of social and private discount rates. We shall try and cover the above and see how they contribute to over exploitation of resources.
Improperly designed property rights
The manner in which people use the natural resources heavily depend on the property rights one has over these natural resources. In the economic aspect, property rights refer to the bundles of benefits which an individual enjoys or which an individual is entitled to for use of the resources and whether he has security for those benefits (Teelucksingh& Nunes, 2010).
By examining and understanding how a particular group utilizes their property rights, one is able to tell how over exploitation of resources comes about. Property rights are either entitled to an individual, a community or to a state. For property rights to ensure that the resources are not over exploited there are several characteristics which they must possess in order to allocate the resources efficiently.
The property rights should be universal that is to mean that the resources should be privately owned and their entitlements completely specified. In this aspect, one should be recognized by the society as the guardian of the specific resource and thus any outsider in order to access the same resource would have to pay to the owner before he can be allowed to use the resource.
However, in many time the universality is not recognized and as a result the resource becomes available to all leading to the overexploitation.
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Property rights should also be exclusive in order to exclude those who don’t own the resource to benefit from it. The exclusivity aspect is very important since it reduces chances of people entering into a place and exploiting the resources carelessly without care of conservation.
Property rights should also be enforceable such that they is a law or an authority which protects the resource from being exploited by outsiders and any individual who exploits the resources without agreement with the owner is liable for punishment bylaw (Grafton, 2004).
This means that any person or group outside the one that has the entitlements cannot come and exploit the resources without the permission of the other however, most of the time we find that exclusivity is not well defined as a result people and even outsiders have access to the resource leading to its over exploitation.
Property rights should also be transferable from one party to the other voluntarily. An owner (individual, community or the state) of a resource with well defined rights has the incentives to use the resource efficiently and avoid over exploitation since a decline in the value of the resource translates into a loss for the owner.
Imperfect market structures
Market is any place (physical or virtual) where exchange of goods and services takes place. In the aspect of natural resources and their usage, the role of the market is to enhance and allow the exchange of goods and resources and in so doing facilitate efficient allocation of resources (Hanley, Shongren & White, 1997).
Given the market price which the user has to pay, the price levels in the market will adjust until equilibrium between the supply and demand is achieved.
If there was no price to pay, people would over exploiting the resources until there was nothing left behind thus bringing the importance of attaching a price behind any exploitation of a resource. If the prices set by the owner and the price which the user desires are not the same, the forces of demand and supply readjusts the price until an efficient allocation is realized.
This way over exploitation of resources does not occur. The efficiency is not achieved since the two parties would have liked to achieve it rather because of the price tag behind exploitation.
Our markets leads to over exploitation of our resources since most of them are imperfect; the price of exploiting the resources is usually cheaper than the price of the resource in the market leading to over exploitation of the resource.
Presence of public goods and common property resources
Over exploitation of our resources is also led by the presence of both public goods and common properties. While the public good has no exclusivity, a common property has exclusivity in that only the members of a certain group are allowed to use the resource however, over exploitation is brought about by the fact that you cannot force the other from exploiting the resource (Wade, 1987).
Access to the resources is usually not restricted and therefore, most people tend to take advantage of the resource and over use it since there is no one to limit the extent in which it can be used. For example, if we take a resource such as a common grazing land.
The one who grazes one animal derives less utility compared to the person who grazes several animals in the same field. As a result, people tend to increase the number of animals grazing in the piece of land until no more utility can be derived by an addition of an extra animal.
The completion for the common resource (grazing land) leads to overgrazing results, the land is overexploited and left bare making it easy for degradation through soil erosion.
The characteristics of public goods which makes over exploitation of public goods easy are due to the non-rivalry in the use. For any level of use of a public resource, additional of an extra user does not result in additional costs and thus more and more people tend to use the resource until it is overexploited (Acheson, 2001).
Divergence of private and social discount rates
Divergence of discount rates is another factor that leads to over exploitation of natural resources. If man wanted wants to exploit the resources faster and at her than the required rates, he places a high discount rate over the resource over the socially efficient discount rate (Grout, 2003).
Economists define social discount rates as the rate which is equal to the social opportunity cost of capital. Social discount rate is defined either in terms of being risk free or being risk premium.
Where a risk free cost of capital where there is absolutely no risk of earning more or less than the expected return while the risk premium is an additional cost which is required to compensate the owner of the capital if the expected returns on capital differ (Tietenberg, 2004).
Most companies use high discount rates which exceeds the social discount rate so as to maximize the current production (exploitation) and as a result this has led to the misallocation of resources and the over exploitation of resources since by using a high discount rate justifies the over exploitation of the resource at the current period.
From the study, we can conclude that over exploitation of natural resources has been brought by man’s desire to fulfill his basic needs. As the population increases, man has to exploit of the available scarce resources in order to fulfill his basic needs.
Among the main drivers which were observed in leading to over exploitation of resources are improperly design of property rights, presence of public goods and common property resources, the existence of imperfect market structures and finally divergence of social and private discount rates where the private companies place their discount rates at high levels so as to be allowed to exploit more currently since a high private discount rate implies more benefits and thus the overuse of the resources.
If over exploitation of resources is ever to stop, man should look for alternative means through which he can satisfy his basic need otherwise with the increase in population, over exploitation of resources will go on.
Acheson, J. (2001). “Capturing the commons: Devising institutions to manage the Maine lobster industry”. Web.
Grafton, Q.R. (2004). The economics of the environment and natural resources. Wiley- Blackwell, New York.
Grout, P. (2003). Public and private sector discount rates in public–private partnerships. The Economic Journal,113(486), c62-c68.
Hanley, N., Shogren, H. and White, B. (1997). Environmental economics in theory and practice. 2nd Edition, Macmillan Publishers.
Teelucksingh, S. and Nunes, P (2010) “The “Ménage-à-Trois” of Biodiversity, Human Welfare and Developing Countries: Can Valuation Techniques Reveal the True Nature of this Relationship”? Web.
Tietenberg, H. (2004). Environmental economics and policy. 4th Edition. Boston- Massachusetts: Addison Wesley.
Wade, R. (1987). The management of common property resources: collective action as an alternative to privatization or state regulation. Cambridge Journal of Economics, 11, 95-106.